Question

A, B and C are partners sharing as 4:3:3. On C’s retirement, the

value of firm’s goodwill was agreed at Rs. 60,000. A and B

agreed to share profits and losses in future in the ratio of

7:3 respectively. Give necessary journal entry in relation to

goodwill.​

Answer 1

Answer:

1. Calculation of gaining ratio 

Old ratio (A, B and C) = 4 : 3 : 2

B retires from the firm

New artio (A and C ) = 5 : 3

Gaining ratio = New ratio - Old ratio

A's new share = (5/8) - (4/9) = (45 - 32) /72 = 13/72

C's new share = (3/8) - (2/9) = (27 - 16) / 36 = 11/72

gaining ratio = 13 : 11

2. Adjustment of goodwill 

C's share of goodwill = (10800 * 3) / 9 = 3600

This share of goodwill is to be debited to remaining partners' capital account in their gaining ratio (i.e., 13 : 11 )

Journal entry for the above will be:

A's capital A/c                    Dr.          1950

C's capital A/c                    Dr.          1650

          To B's capital A/c                            3600